But a combination of factors, including stiff competition, a downturn in the economy and the construction of expensive headquarters in Burbank combined to reverse the company's fortunes, analysts and others said. In the spring of 1983, the company's stock was selling for less than $3 a share. One year earlier, it had sold at $38.

The company was also saddled with a class-action lawsuit filed against it and three former top executives. The suit, filed by investors in U.S. District Court in Los Angeles in 1982, alleged that Compact and the executives had overstated earnings and inflated its stock price from June, 1980, to January, 1982.

Settled Lawsuit

Under a settlement last year, Compact agreed to contribute up to 85,000 shares of its stock, plus an amount close to $3 million, to a fund that contains $2.5 million provided by the insurers of Compact's management during the period covered by the suit.

Perelman became involved in Compact in a big way in 1983 when Technicolor, a subsidiary of Perelman's MacAndrews, sold a post-production company, Vidtronics, to Compact for $12.5 million in stock, cash and notes. By virtue of his ownership of Technicolor, Perelman wound up with 640,000 shares of the company's common stock in the deal.

Compact's recent acquisitions began last June when Compact acquired 92% of Four Star, which was 54% owned by Technicolor, in a stock swap deal. Compact exchanged 1.1 shares of the company's common stock for each share of Four Star's. In September, Four Star became a wholly owned subsidiary of Compact when Compact purchased the remaining outstanding shares.

Even before that deal was completed, however, Compact, in August, acquired VidAmerica from Video Corp. of America, a subsidiary of Perelman's MacAndrews, for about $5 million. A month later, Compact acquired Brooks Drug for $95 million from Perelman's Revlon Group. The purchase price was later adjusted downward to $91.2 million.

Debt Jumped to $1.6 Million

To help finance the acquisitions, Compact, in July last year, sold $80 million in junk bonds through Perelman's investment banker, Drexel Burnham Lambert. Largely because of the Brooks acquisition, Compact's debt at the end of 1986 jumped from $1.6 million a year earlier to $160 million.

Some who follow Compact said the acquisitions of Four Star and VidAmerica make sense because they fit nicely with what Compact has been doing all along. But the Brooks purchase has left these same people confounded.

Brooks, founded in 1933, operates about 400 retail stores in the Northeast and Mid-Atlantic regions. Analyst Offen said Brooks, which Perelman earlier had tried to sell, is not considered "one of the shining stars of the drug industry."

Fidelity's Ramsey said the company has a good distribution system and name recognition. The company itself has been attempting to upgrade the chain by closing unprofitable stores, modernizing existing ones and opening new outlets. During 1986, it opened five stores, remodeled 27 and closed 22. The chain accounted for $113.5 million of Compact's total net revenues of $155.7 million.

Ramsey said she believes Compact, for the time being anyway, will be a drugstore chain. It has been five years since the firm has been involved in the mobile video-van assembly business. Although the stock has not responded positively to the moves--last year it fluctuated between a high of 8 3/4 and a low of 3 3/4--Ramsey said she believes investors have to be patient.

"It's a company being restructured," she said.

Offen points out that Compact is Perelman's only publicly held vehicle now. "I think Perelman's goal is to build Compact into an acquisition vehicle and use it for interesting companies they feel they can buy at the right price," Offen said.

Not everyone is as optimistic that the shareholders will benefit from Perelman's moves. The investor who did not want to be identified worries that Perelman could attempt to take the company private as early as this fall, offering stockholders a price for their shares well below what they could be worth.

"My bet is that he is going to frustrate the world," he said. "He is not going to tell anybody anything."

COMPACT VIDEO INC. AT A GLANCE Compact Video was founded in 1971 in Burbank. About 40% of its stock is owned by New York-based MacAndrews and Forbes Holdings Inc. Compact Video provides post-production services for the television industry, markets and distributes feature films and television programs and operates drug stores. It has 2,969 full-time and 3,184 part-time employees nationwide, and 6,581,537 shares of common stock outstanding.

Effective Dec. 31, 1985, the company changed its fiscal year ending from April 30 to dec. 31, or a calendar year.